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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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December 3, 2012

Marcia Angell's Interview: I Just Can't

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Posted by Derek

I have tried to listen to this podcast with Marcia Angell, on drug companies and their research, but I cannot seem to make it all the way through. I start shouting at the screen, at the speakers, at the air itself. In case you're wondering about whether I'm overreacting, at one point she makes the claim that drug companies don't do much innovation, because most of our R&D budget is spent on clinical trials, and "everyone knows how to do a clinical trial". See what I mean?

Angell has many very strongly held opinions on the drug business. But her take on R&D has always seemed profoundly misguided to me. From what I can see, she thinks that identifying a drug target is the key step, and that everything after that is fairly easy, fairly cheap, and very, very profitable. This is not correct. Really, really, not correct. She (and those who share this worldview, such as her co-author) believe that innovation has fallen off in the industry, but that this has happened mostly by choice. Considering the various disastrously expensive failures the industry has gone through while trying to expand into new diseases, new indications, and new targets, I find this line of argument hard to take.

So, I see, does Alex Tabarrok. I very much enjoyed that post; it does some of the objecting for me, and illustrates why I have such a hard time dealing point-by-point with Angell and her ilk. The misconceptions are large, various, and ever-shifting. Her ideas about drug marketing costs, which Tabarrok especially singles out, are a perfect example (and see some of those other links to my old posts, where I make some similar arguments to his).

So no, I don't think that Angell has changed her opinions much. I sure haven't changed mine.

Comments (59) + TrackBacks (0) | Category: Business and Markets | Drug Development | Drug Industry History | Drug Prices | Why Everyone Loves Us


COMMENTS

1. RB Woodweird on December 3, 2012 12:02 PM writes...

Das ist nicht nur nicht richtig, es ist nicht einmal falsch!

Permalink to Comment

2. darwin on December 3, 2012 12:10 PM writes...

Given her educational background and career, she could have more credibility and influence tackling policy and corruption within the AMA. But then again, that probably wouldn't make headlines or sell books.

Permalink to Comment

3. Biotechtranslated on December 3, 2012 12:55 PM writes...

Derek,

I had that same podcast bookmarked to listen to at a later time. I think you've convinced me to skip it.

There is nothing wrong with listening to the opposing side, but if it's that misinformed, it loses any intellectual value.

Mike

Permalink to Comment

4. microbiologist on December 3, 2012 1:31 PM writes...

Two pieces of misinformation struck me:
First, that all drugs are discovered either in academic labs or in small companies that have spun out of academic labs. Thus, she says, drug discovery is all publicly funded (eg, by NIH grants).

Second, that me-too drugs are tested vs placebo rather than vs existing, similar drugs - so there is no way to know whether a newly approved drug is any better than a previous drug in its class.

It is shocking that someone with so poor an understanding of drug discovery and development could have been an editor at NEJM for 20 years.

Permalink to Comment

5. LeeH on December 3, 2012 1:33 PM writes...

I agree with your points completely, Derek. I do agree with a few of her points (which she makes in her book), especially her views on pharmaceutical advertising. Imagine if a good part of marketing money was freed up, and directed at research.

Permalink to Comment

6. Aspirin on December 3, 2012 1:37 PM writes...

Angell: "Far from being a “research-based industry,” as it likes to call itself, the pharmaceutical industry now devotes most of its resources to functioning as a vast marketing and advertising enterprise whose best products were discovered and often partially developed elsewhere—usually at public expense."

Right. That's what I and thousands of other scientists in pharma do all day long, marketing and advertising. Can't believe this git was the editor of the NEJM.

Permalink to Comment

7. Yancey Ward on December 3, 2012 1:48 PM writes...

Lee H,

The problem is that people don't realize that marketing is necessary part of a business. You say marketing dollars can be freed up for research, but without the marketing, the revenue to support such activities don't exist in the first place.

Permalink to Comment

8. Curious Wavefunction on December 3, 2012 2:08 PM writes...

#7: True, but DTC has given pharma a great incentive to spend a lot more money on marketing than what seems reasonable (IMO, DTC was a big mistake since it unduly raised the profile of marketing relative to research).

I do think that some of those marketing dollars can be used in productive research; if you have a truly life-changing drug, then you may not have to market the hell out of it to make it successful.

Permalink to Comment

9. drug_hunter on December 3, 2012 2:50 PM writes...

She's shrill and nasty and supercilious, that's for sure ... She is obviously ignoring all the data that doesn't agree with her worldview. I'll assume it is not stupidity -- so she is deliberately pursuing an agenda.

Does anyone know what is motivating her? (I have a theory but I'd like to hear what others think.)

And, is anyone who matters actually listening to her? In other words, is she actually influencing the FDA or Congress?

Permalink to Comment

10. emjeff on December 3, 2012 3:05 PM writes...

#8 - Define "reasonable". You won't be able to, because what is reasonable to you may not be to me. I think it is ok for private enerprises to spend their money on legal things designed to increase profits.

Sorry, but that is the way it is. As soon as you try to put rules around that, you are entering the world of government control, which spells doom.

Permalink to Comment

11. Rafael Fonseca MD on December 3, 2012 3:12 PM writes...

I am glad to see more posts like this. Those misconceptions (i.e Dr Angel's) are unfortunately perpetuated in medical journals (See Lesko and Stossel Nature Biotechnology 2011). It is undeniable that the biotech sector and pharma contribute greatly to human well being. Much more than they ever get credit! Lost of progress because of the partnership with academic centers! But people have been shy and feared speaking out. We created ACRE 3 years ago and most were quiet reluctant to speak up.

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12. Curious Wavefunction on December 3, 2012 3:53 PM writes...

#8: Yes, we can differ on the definition of reasonable, but at some point the gap between marketing and actual product quality can be objectively judged. If the gap is large (and although "large" is also subjective, it should be subject to better metrics than "reasonable") it should give you pause for thought. There should be an obvious problem if you have to spend billions on marketing to convince people to buy snake oil.

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13. jane doe on December 3, 2012 4:07 PM writes...

I'm not sure how anyone can defend the market distorting patent monopolies that lead to copycat research, insanely distorted prices, lack of transparent research, corruption of doctors, corruption of government policy, etc.

But rent seeking and extraction of income is often not opposed by nanny state conservatives that believe in being defended from the rigors of the free market.

Permalink to Comment

14. newnickname on December 3, 2012 4:10 PM writes...

@7 and others. I also take issue with "marketing" versus "mis-marketing". Too much of the advertising budgets boost sales inappropriately (medically, that is). I am also very much against DTC advertising and think it should be stopped.

An almost off-topic question: I sometimes refer to cortisone and hydrocortisone, miracle drugs of the 1950s. Today, a 30 g tube of 10% hydrocortisone costs a few of dollars (retail). Does anyone have any idea how much cortisone cost in its earliest days? I think the old pharmaceutical price books are archived somewhere but I can't find them on-line. Thank you.

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15. Lyle Langley on December 3, 2012 4:13 PM writes...

@#10, emjeff....
"Sorry, but that is the way it is. As soon as you try to put rules around that, you are entering the world of government control, which spells doom."

Ummm, the government already has those controls - they control the prescription drug business and the marketing of said drugs. The main argument is DTC which was not allowed until relatively recently.

Permalink to Comment

16. Fred on December 3, 2012 4:35 PM writes...

"From what I can see, she thinks that identifying a drug target is the key step, and that everything after that is fairly easy, fairly cheap, and very, very profitable."

If that were true, we wouldn't have so many targets lacking potent and/or adequately selective inhibitors.

Permalink to Comment

17. MTK on December 3, 2012 4:55 PM writes...

Dr. Angell's logic as I understand it is

a) pharma doesn't innovate only sell, and
b) pharma is only interested in making money.

The flaw here is that pharma not only spends a lot of money on clinical trials, but also on scientific talent. (OK,insert your outsourcing joke here, but let's face it they do, certainly more than academia.)

If a and b are true when would they spend all that money on talent at all?

Permalink to Comment

18. Jane Doe on December 3, 2012 5:28 PM writes...

The argument is not whether everything pharma does is bad. The argument is if an alternative to pharma would be better. Government backed research that put all of their findings into the public domain, stopped the incentive for copycat research, lowered the costs of drugs to the production price (like generics), etc.

This alternative would lead to more innovation, be more efficient, lower costs for otherwise insanely expensive drugs, and advance the progress of medical research.

But unfortunately nanny state conservatives need the government to interfere in the free market by giving them a market distorted monopoly prices.

Permalink to Comment

19. qetzal on December 3, 2012 6:07 PM writes...

@Jane Doe:

Developing drugs publicly won't cause true prices to drop to the production price. It costs a lot of money to develop a drug, prove it works in patients, scale up its manufacture, meet the regulatory requirements, etc. Doing that with taxes wouldn't magically eliminate those costs. At best, it would only eliminate the pharma profit component. Many would also argue that govt would likely do it less efficiently than pharma, which would (if true) at least partly abrogate the saved profits.

Of course, the govt could then choose to sell drugs based only on the production costs, but you'd still be paying the development costs. They'd just be disguised as taxes, and you wouldn't even have the option of deciding whether you wanted to pay for those drugs.

I'm not necessarily arguing that public development of drugs is a bad idea. (FWIW, I generally favor single-payer health care.) I'm just saying it's not nearly as black and white as you've suggested.

Permalink to Comment

20. A Casual Observer on December 3, 2012 6:44 PM writes...

It's a shame she knows so little about R&D and is so out of touch with the current situation, because there are a few good points in there. As it is, she sounds like (at best) she stopped watching long ago (all the trials are against placebo? really?), so if you're at all familiar with reality she just sounds like an idiot and is easy to dismiss.

Basically she's locked in to the theory that it's all about the conflicts of interest and a big conspiracy, and can't seem to get it into her head that there are other factors involved that make things complicated. The interviewer does do a good job, in a few but not enough places, of pointing out a select few of her blind spots.

Where does she have a point? Well, it really is goofy that (almost) all the data is from work conducted by the pharmas (would we accept that for cars or food?), intolerable that there exist FDA-approved human studies that don't get around to publishing most of their data, Nexium really was a travesty, and pharma marketing practices have gotten better but still not exactly unimpeachable.

Others are doing a much better job than Angell of discussing pharma's failings for a general audience -- see for example "Bad Science" by Ben Goldacre.

Permalink to Comment

21. Jane Doe on December 3, 2012 8:15 PM writes...

"...but you'd still be paying the development costs"

Of course, but there are probably an infinite number of alternatives that would be more efficient and lead to more innovation.

From Dean Baker's Guardian Piece entitled Why pharma's patents are a drug on the market: "The country is projected to spend almost $300bn a year on prescription drugs this year. Prices would fall to roughly one-tenth this amount in the absence of patent monopolies, leading to savings of more than $250bn."

He suggests the Sanders prize fund or "the route of direct, upfront government funding where the government would contract for the research in advance."

He also points out that going to an alternative system would also 1) Eliminate bureaucracy 2) Cheap life saving drugs 3) Less incentive for deceptive marketing 4) Less incentive for copycat drugs 5) Publicly available research

He concludes: "The Centres for Medicare and Medicaid Research project that we will spend almost $4tn on prescription drugs over the next decade. This is almost $10,000 for every man, woman and child in the country."

You may think these kind of development costs are worth it, but I personally don't like the government distorting market outcomes through invasive nanny state interference.

Permalink to Comment

22. DH on December 3, 2012 8:38 PM writes...

@Jane Doe: Constant repetition of the talking point that patent protection is "nanny state interference" does not make it true. But if you really do oppose nanny state interference, presumably you favor abolishing the FDA, which tells us what we can and cannot put in our bodies of our own free choice. So let's agree to abolish both drug patents and the FDA, and to let pharma companies keep their drug structures and formulations as proprietary trade secrets. That way, they can protect their investments without any government distortion of the rigors of the free market. Deal?

Permalink to Comment

23. Inventor on December 3, 2012 8:50 PM writes...

I'm listening to the pod cast and I'm frankly stunned. Does everyone have the same genome (me-too drugs)? Is potency the same as efficacy? Does she have an ax to grind? I don't get it.

Permalink to Comment

24. Anonymous Academic on December 3, 2012 9:05 PM writes...

@22: I personally don't like the government distorting market outcomes through invasive nanny state interference.

I'm not very sympathetic to the business end of Big Pharma either, but I think you have your buzzwords confused. Making this statement, after multiple comments in which you suggest that the government could do a better job of drug development than the pharmaceutical companies, is simply incoherent.

Permalink to Comment

25. Jane Doe on December 3, 2012 9:07 PM writes...

It's not a me-too drug if they are making a slightly different version of a drug because a portion of the population doesn't respond to an existing drug. That probably happens inadvertently already, but with multiple (and IMO much worse) costs that clearly outweigh the benefits of these me-too drugs.

Due to the government granted monopoly, companies have a huge incentive to simply create a me-too drug that isn't shown to benefit a different population. They know they can make a clinically indistinguishable version and by using advertising and kickbacks influence consumer preference (government interference in the market often creates perverse incentives).

Permalink to Comment

26. Jane Doe on December 3, 2012 9:28 PM writes...

AA

Big pharma is a government created industry (it wouldn't exist without it granting monopolies and other interference). Thus the government is already developing our drugs.

The very nature of drug development (as we're used to it) requires substantial government intervention. I'm simply making it clear that this form of the nanny-state is projected to extract nearly $10,000 from tax payers over the next decade for prescription drugs.

If you want less government interference (less taxes and less distortions from granting monopolies) leading to more efficient outcomes, These alternative funding mechanisms, like the Sanders prize fund or "upfront government funding where the government would contract for the research in advance" would lead to substantially less government created distortions and inefficiencies (if we are going to have a nanny-state, it might as well work).

Permalink to Comment

27. Hyperion on December 3, 2012 10:24 PM writes...

Jane,

I think that you may be misunderstanding how "me-too" drugs are developed. In many cases, these drugs are all in development at the same time, with no way of knowing which drug will be approved first or which of them might prove to be useless due to some unexpected property not shared by similar drugs.

Similarly, there is often no way of determining what the differences between these drugs will be before Phase III testing, which is where a lot of the costs come into play. So the distinction that you make between "me-too" drugs and those where slight differences lead to pharmacological differences is a false distinction.

Finally, your assertions about efficiency and cost are muddled and unclear. Many of the costs related to drug development are an inherent part of the difficulty involved and the (absolutely necessary) regulatory requirements for clinical testing. From a public policy perspective (as a former public policy analyst), our system for drug development, while imperfect, is still fairly efficient. The risks are borne by private enterprise, in exchange for a limited monopoly to recoup their profits. The monopoly period is limited such that it creates an incentive for the companies to continue to research new drugs or risk a massive drop in profits as patents expire.

There are certainly areas where this system runs into market failures: antibiotic drugs, for example. The necessity to use new antibiotics sparingly dramatically reduces their profitability during the limited period where a company has an exclusive patent, thus limiting the incentives to develop such drugs.

There is also the issue of how to handle a new indication for a drug after its patent has expired. It can be prescribed off-label (which Angell opposes), or it can go through the approval process for the new indication just as if it were a new drug, with all the same costs, in which case the drug can often recieve a new patent for the new indication. This creates a difficult choice: is it better to have access to a drug as an affordable generic or is it better to obtain the best clinical evidence before using a drug for a new indication? There is no easy answer, the former choice gets people like Angell complaining, but the latter choice causes complaints about a drug suddenly increasing in price.

Ultimately this is all about tradeoffs. There is no perfect system, the current system has flaws, but so do any proposed changes. This, ultimately, is the flaw in your reasoning and Angell's.

(as an aside, I also don't get Angell's obvious issues. I remember reading her fawning review of Whittaker's book a few years back and thinking that she must have no experience in medicine. Since this is obviously not the case, what is her agenda?)

Permalink to Comment

28. Hyperion on December 3, 2012 10:25 PM writes...

Jane,

I think that you may be misunderstanding how "me-too" drugs are developed. In many cases, these drugs are all in development at the same time, with no way of knowing which drug will be approved first or which of them might prove to be useless due to some unexpected property not shared by similar drugs.

Similarly, there is often no way of determining what the differences between these drugs will be before Phase III testing, which is where a lot of the costs come into play. So the distinction that you make between "me-too" drugs and those where slight differences lead to pharmacological differences is a false distinction.

Finally, your assertions about efficiency and cost are muddled and unclear. Many of the costs related to drug development are an inherent part of the difficulty involved and the (absolutely necessary) regulatory requirements for clinical testing. From a public policy perspective (as a former public policy analyst), our system for drug development, while imperfect, is still fairly efficient. The risks are borne by private enterprise, in exchange for a limited monopoly to recoup their profits. The monopoly period is limited such that it creates an incentive for the companies to continue to research new drugs or risk a massive drop in profits as patents expire.

There are certainly areas where this system runs into market failures: antibiotic drugs, for example. The necessity to use new antibiotics sparingly dramatically reduces their profitability during the limited period where a company has an exclusive patent, thus limiting the incentives to develop such drugs.

There is also the issue of how to handle a new indication for a drug after its patent has expired. It can be prescribed off-label (which Angell opposes), or it can go through the approval process for the new indication just as if it were a new drug, with all the same costs, in which case the drug can often recieve a new patent for the new indication. This creates a difficult choice: is it better to have access to a drug as an affordable generic or is it better to obtain the best clinical evidence before using a drug for a new indication? There is no easy answer, the former choice gets people like Angell complaining, but the latter choice causes complaints about a drug suddenly increasing in price.

Ultimately this is all about tradeoffs. There is no perfect system, the current system has flaws, but so do any proposed changes. This, ultimately, is the flaw in your reasoning and Angell's.

(as an aside, I also don't get Angell's obvious issues. I remember reading her fawning review of Whittaker's book a few years back and thinking that she must have no experience in medicine. Since this is obviously not the case, what is her agenda?)

Permalink to Comment

29. Hyperion on December 3, 2012 10:26 PM writes...

Jane,

I think that you may be misunderstanding how "me-too" drugs are developed. In many cases, these drugs are all in development at the same time, with no way of knowing which drug will be approved first or which of them might prove to be useless due to some unexpected property not shared by similar drugs.

Similarly, there is often no way of determining what the differences between these drugs will be before Phase III testing, which is where a lot of the costs come into play. So the distinction that you make between "me-too" drugs and those where slight differences lead to pharmacological differences is a false distinction.

Finally, your assertions about efficiency and cost are muddled and unclear. Many of the costs related to drug development are an inherent part of the difficulty involved and the (absolutely necessary) regulatory requirements for clinical testing. From a public policy perspective (as a former public policy analyst), our system for drug development, while imperfect, is still fairly efficient. The risks are borne by private enterprise, in exchange for a limited monopoly to recoup their profits. The monopoly period is limited such that it creates an incentive for the companies to continue to research new drugs or risk a massive drop in profits as patents expire.

There are certainly areas where this system runs into market failures: antibiotic drugs, for example. The necessity to use new antibiotics sparingly dramatically reduces their profitability during the limited period where a company has an exclusive patent, thus limiting the incentives to develop such drugs.

There is also the issue of how to handle a new indication for a drug after its patent has expired. It can be prescribed off-label (which Angell opposes), or it can go through the approval process for the new indication just as if it were a new drug, with all the same costs, in which case the drug can often recieve a new patent for the new indication. This creates a difficult choice: is it better to have access to a drug as an affordable generic or is it better to obtain the best clinical evidence before using a drug for a new indication? There is no easy answer, the former choice gets people like Angell complaining, but the latter choice causes complaints about a drug suddenly increasing in price.

Ultimately this is all about tradeoffs. There is no perfect system, the current system has flaws, but so do any proposed changes. This, ultimately, is the flaw in your reasoning and Angell's.

(as an aside, I also don't get Angell's obvious issues. I remember reading her fawning review of Whittaker's book a few years back and thinking that she must have no experience in medicine. Since this is obviously not the case, what is her agenda?)

Permalink to Comment

30. Hyperion on December 3, 2012 10:27 PM writes...

Jane,

I think that you may be misunderstanding how "me-too" drugs are developed. In many cases, these drugs are all in development at the same time, with no way of knowing which drug will be approved first or which of them might prove to be useless due to some unexpected property not shared by similar drugs.

Similarly, there is often no way of determining what the differences between these drugs will be before Phase III testing, which is where a lot of the costs come into play. So the distinction that you make between "me-too" drugs and those where slight differences lead to pharmacological differences is a false distinction.

Finally, your assertions about efficiency and cost are muddled and unclear. Many of the costs related to drug development are an inherent part of the difficulty involved and the (absolutely necessary) regulatory requirements for clinical testing. From a public policy perspective (as a former public policy analyst), our system for drug development, while imperfect, is still fairly efficient. The risks are borne by private enterprise, in exchange for a limited monopoly to recoup their profits. The monopoly period is limited such that it creates an incentive for the companies to continue to research new drugs or risk a massive drop in profits as patents expire.

There are certainly areas where this system runs into market failures: antibiotic drugs, for example. The necessity to use new antibiotics sparingly dramatically reduces their profitability during the limited period where a company has an exclusive patent, thus limiting the incentives to develop such drugs.

There is also the issue of how to handle a new indication for a drug after its patent has expired. It can be prescribed off-label (which Angell opposes), or it can go through the approval process for the new indication just as if it were a new drug, with all the same costs, in which case the drug can often recieve a new patent for the new indication. This creates a difficult choice: is it better to have access to a drug as an affordable generic or is it better to obtain the best clinical evidence before using a drug for a new indication? There is no easy answer, the former choice gets people like Angell complaining, but the latter choice causes complaints about a drug suddenly increasing in price.

Ultimately this is all about tradeoffs. There is no perfect system, the current system has flaws, but so do any proposed changes. This, ultimately, is the flaw in your reasoning and Angell's.

(as an aside, I also don't get Angell's obvious issues. I remember reading her fawning review of Whittaker's book a few years back and thinking that she must have no experience in medicine. Since this is obviously not the case, what is her agenda?)

Permalink to Comment

31. Hyperion on December 3, 2012 10:30 PM writes...

Akkk, my apologies for the repeated post, I think my tablet is misbehaving.

Permalink to Comment

32. Hyperion on December 3, 2012 10:31 PM writes...

Akkk, my apologies for the repeated post, I think my tablet is misbehaving.

Permalink to Comment

33. qetzal on December 3, 2012 11:47 PM writes...

"The country is projected to spend almost $300bn a year on prescription drugs this year. Prices would fall to roughly one-tenth this amount in the absence of patent monopolies, leading to savings of more than $250bn."

Sure, if you remove patent protection on drugs where the development cost is already sunk, then prices can fall to near production cost. To a first approximation, that's what generics are, right?

That still doesn't address the need to pay development costs for drugs that don't yet exist.

Or are you suggesting that on average, patented drugs are priced at 10 times the total development cost?! Yes, pharma has generally been profitable, but I'm pretty sure they don't get a 900% return on investment!

When I see such misunderstanding of basic issues, it makes it very hard to give much credence to blithe pronouncements of eliminating bureaucracy, cheap life-saving drugs, etc. Not that I think the current system is the best possible. Far from it. But people who clearly don't understand basic realities of the current system are not likely to know how to make things better.

Permalink to Comment

34. Jane Doe on December 4, 2012 12:25 AM writes...

Qetzal:

"That still doesn't address the need to pay development costs for drugs that don't yet exist."

Straw man. If you go back and look at my above posts I suggest two alternatives (one from Senator Bernie Sanders, one from the Economist Dean Baker). Both would lead better outcomes at lower costs.

Permalink to Comment

35. Jane Doe on December 4, 2012 12:56 AM writes...

Hyperion

"Ultimately this is all about tradeoffs. There is no perfect system, the current system has flaws, but so do any proposed changes. This, ultimately, is the flaw in your reasoning and Angell's."

More fallacious reasoning. Everyone already acknowledges this comes down to tradeoffs, and people like Angell believe an alternative system would have less flaws.

To say that this system is "fairly efficient" is quite the assertion. But given that you're the "former public policy analyst," I assume I'm supposed to accept it without evidence.

Our system is far from being efficient and there are many alternatives that would decrease the massive rent seeking. But given that my assertions are "muddled" I'll quote one paper that I've been referring to.

From Dean Baker's 2004 paper "Financing Drug Research: What Are The Issues?":

"Patent monopolies cause economic distortions in the same way that trade tariffs or quotas lead to economic distortions, but the size of the distortions are far greater. While trade barriers rarely increase prices by more than 10 to 20 percent, drug patents increase prices by an average of 300- 400 percent above the competitive market price, and in some cases the increase is more than 1000 percent. Simple calculations suggest that the deadweight efficiency losses from patent protection are roughly comparable in size to the amount of research currently supported by the patent system – approximately $25 billion in 2004.

Projections of rapidly rising research costs, and therefore a growing gap between price and marginal cost, imply that the deadweight loss due to drug patents will exceed $100 billion a year by 2013.

As economic theory predicts, government granted patent monopolies lead not only to deadweight efficiency losses due to the gap between the patent protected price and the competitive market price, but also to a variety of other distortions. Among these distortions are:

1) excessive marketing expenses, as firms seek to pursue the monopoly profits associated with patent protection – data from the industry suggests that marketing costs are currently comparable to the amount of money spent on research;

2) wasted research spending into duplicative drugs – industry data indicates that roughly two thirds of research spending goes to developing duplicative drugs rather than drugs that represent qualitative breakthroughs over existing drugs;

3) the neglect of research that is not likely to lead to patentable drugs;

4) concealing research findings in ways that impede the progress of research, and prevent the medical profession and the public from becoming aware of evidence that some drugs may not be effective, or could even be harmful.

In addition, the patent system for financing prescription drug research poses large and growing problems in an international context. Disputes over patent rules have increasingly dominated trade negotiations. Furthermore, problems of enforcement have persisted even after agreements have been reached. These problems are likely to worsen through time, as the pharmaceutical industry seeks to increase the amount of money it extracts from other countries through patent rents.

This paper examines four alternatives to the patent system:
1) A proposal by Tim Hubbard and James Love for a mandatory employer-based research fee to be distributed through intermediaries to researchers (Love 2003);

2) A proposal by Aidan Hollis for zero-cost compulsory licensing patents, in which the patent holder is compensated based on the rated quality of life improvement generated by the drug, and the extent of its use (Hollis 2004);

3) A proposal by Michael Kremer for an auction system in which the government purchases most drug patents and places them in the public domain (Kremer 1998);2 and

4) A proposal by Representative Dennis Kucinich to finance pharmaceutical research through a set of competing publicly supported research centers (Kucinich 2004).

All four of these proposals finance prescription drugs in ways that allow most drugs to be sold in a competitive market, without patent monopolies. These proposals also would eliminate many of the economic distortions created by the patent system."

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36. drug_hunter on December 4, 2012 1:02 AM writes...

It is interesting to speculate on what is the "waste" in the system from "duplication" at all stages (target validation, HTS, biomarker research, clinical programs, etc. If everyone was pooling all their data, and coordinating efforts, maybe you could imagine ... 20% (?) of the costs would go away. That's a wild-ass guess. Let's even call it 30% (which feels too high to me). Then drugs would still cost $5B each (taking the $7B median figure from Matt Herper's recent article and cutting it by 30%). And we would still be complaining about the high cost of drugs. No, I'm afraid the solution to the problem is -- wait for it -- that we need to get smarter about how to pick targets and make drugs. Pretty anticlimactic, really. No wild conspiracies needed. Nothing to get shrill about, and no need to invoke nanny state politics (whatever the hell that means).

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37. Chemist turned Hedgie on December 4, 2012 3:53 AM writes...

"If you want less government interference (less taxes and less distortions from granting monopolies) leading to more efficient outcomes, These alternative funding mechanisms, like the Sanders prize fund or "upfront government funding where the government would contract for the research in advance" would lead to substantially less government created distortions and inefficiencies (if we are going to have a nanny-state, it might as well work)."

Jane,

Do you seriously think that mandating government to direct drug research will lead to less interference than the patent system? Do you also believe that government would be more efficient than industry in managing this research effort? Am I alone in thinking that government intervention on this scale to deal with your perceived iniquities of the patent system is ironic overload?

There are many problems with drug expenditure in the US, but I would argue that the one of the biggest is (was?) probably the patient (and often, physician) fixation with the newest and most expensive therapy, rather than greater use of step therapy that we see in Europe- why start antihypertensive treatment with a branded ARB when a dime-a-dozen diuretic might well work? Why does anybody use Nexium when generic omeprazole is available?

Hyperion is spot on with his comments about me-too drugs. It is impossible to know the relative performance of any drug before late stage clinical trials...assuming that those competing drugs are actually known entities at the time. However, it is pretty clear now that the days when one could turn a me-too drug into a blockbuster are over- payers simply won't accept it. However, the situation has moved even further- Brilinta is in many ways clearly superior to Plavix, but is doomed to economic failure in the face of generic clopidogrel.

Let us also not forget that drugs account for only 12% of US healthcare expenditure (of which only 8% is for branded drugs), so if you are (rightly) aggrieved with the cost of healthcare, don’t forget the other 88%. The pharma industry gets it in the neck principally because of its visibility, rather than its total culpability.

I am an unapologetic child and disciple of Margaret Thatcher, so pause before accusing me of being an advocate of the nanny state in any form. I simply don’t get your idea that the patent system is the problem here. The US Constitution gave Congress the power “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”, which I think in the pharmaceutical arts they have done admirably (let’s not get into a debate here about the rights and wrongs of software and business method patents where you might have a point….). It is no coincidence that all the leading innovating nations in the world in the pharma industry have strong patent systems. You also forget one very important aspect of that government granted monopoly- public disclosure. Aside from the incentive to invent in the first place, this is a powerful support for innovation itself.

The pharma industry is not perfect, but your diagnosis, like Angell’s, is dangerously wide of the mark.

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38. Jane Doe on December 4, 2012 5:40 AM writes...

I'm simply advocating free market solutions (the four non-patent solutions above in Dean Baker's paper are far less market distorting, read the paper). I don't like it when the government takes my income and redistributes it for me to promote big bird or NPR.

Likewise, I don't like it when government interferes with pharmaceuticals and redistributes my income to drug companies because they are scared of the free market. I'm for the solutions that will lead to the least amount of redistribution, market distortions, and inefficiencies. I have nothing against drug companies, but I don't like subsiding them with my income.

You are absolutely correct that the drug companies are simply one part of the most dysfunctional health care system in the world. I want free trade with doctors as well (international standards and agreements). Once again, I'm sure that doctors appreciate getting paid more than they could earn in a free market, but I don't appreciate giving my income to physicians (they would be paid about half as much in a free market). I could write some things about the inefficiency of our current private insurance system but they of course want there government welfare like the drug companies and doctors.

Ultimately, at some point, just like with welfare queens, we have draw the line somewhere. Given the current state of affairs (government subsidies are addicting), allowing people to buy into other health care systems and pocket the difference might be the only way to reform the system. A little competition might go a long ways.

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39. Calvin on December 4, 2012 5:56 AM writes...

Clueless. Derek I don't know where to start. I actually listened to the thing in a state of some shock. It's a massive problem for our industry that this nonsense can be portrayed as fact. She is deluded. I'm frustrated that my own (non-profit) organisation which funds an enormous amount of basic research and translational research (often with the is simply discounted. Our work would not be successful without industry. Angell's US-centric world-view demonstrates how limited her understanding of drug research and development is

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40. Derek Lowe on December 4, 2012 7:30 AM writes...

Jane Doe, some of those proposals have been discussed around here before, but I'd be glad to pick up on the ones that haven't and make them the subject of some new posts.

But I wanted to add that, aside from your policy suggestions, that you're writing in the manner of someone who bought some sort of "How To Speak Conservative" phrase book, and is trying out their fluency in this strange new language. You might want to note that politically, this isn't a particuarly right-wing crowd, as becomes apparent every time I let fly with my own political views (!)

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41. qetzal on December 4, 2012 10:29 AM writes...

Jane Doe writes:

Qetzal:

"That still doesn't address the need to pay development costs for drugs that don't yet exist."

Strawman.

So you disavow your previous claim (comment #18) that govt could develop drugs for barely more than the production cost? That's good to hear!

Sarcasm aside, it's hard to take seriously people who throw out obviously unrealistic arguments like "lower[ing] the cost of drugs to the production price" (you), or "Prices would fall to roughly one-tenth" (Baker). Especially when they refuse to acknowledge the error in such trivially flawed claims. It suggests such people care more about their ideology than objective reality.

You and Baker may well be right in some of your other claims, but your rhetoric and hyperbole suggests that you're not above misrepresentation. Thus, I have no interest in taking you or Baker at your word, nor in delving further into your claims.

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42. BuyandBye on December 4, 2012 11:53 AM writes...

Four points:

1) WTF is a nanny state conservative? (Oxymoronic)
2) NO business can charge production cost for their product. Not one.
3) thankfully, some of us are actually working on drugs to help treat delusional paranoia.
4) NO New drug in a class will be approved through a "non-inferiority" clinical study design... Today. Only a complex generic (biological or not) has the regulatory "burden" to show equivalent performance,and rightly so. All others must show improvement over existing standard of care, not just for approval, but for docs to adopt.

I too could not get through more than a few minutes of the podcast. Diminishes the credibility of the NEJM.

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43. B on December 4, 2012 12:28 PM writes...

@42: For the sake of being pedantic, Google charges at product cost (maybe even less?) for the Nexus 7 and the Nexus 4. However, they have devised a service based business model that allows them to do so. The pharmaceutical industry isn't in that position.

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44. BuyandBye on December 4, 2012 2:15 PM writes...

@43. Point taken; the hardware is not Google's business focus as you indicate, it's the bait/loss leader gateway to their core business... at least i hope so. These IT giants are already facing anti-trust issues without "bundling" hardware for their service. See one of the recent issues of the Economist.

Anyway - Still want to know what a nanny state conservative is.

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45. MarcS on December 4, 2012 2:40 PM writes...

One of the things I really like about the EconTalk podcast is that Russ Roberts goes out of his way to avoid being an echo chamber for his own ideology. He very often interviews people with very different views from his own and and gives his guests a fair hearing. As the show is an interview and not a debate he generally doesn't attempt to argue forcefully against his guests. On the whole, EconTalk is a really interesting program and I've learned a lot from listening to it over the years.

Unfortunately, it really only works if the his guests are intellectually honest. As I listened to the show I found that some of what Ms. Angell had to say seemed to make some sense and she had some good points early on. But as the show progressed I become more concerned that she wasn't really describing the industry as it really is. Based on Derek's response and many of the comments here it seems like the situation was even worse than I had thought.

It seems at best she is willfully ignorant of the realities of the drug discovery business and even that might be granting her too much.

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46. Jane Doe on December 4, 2012 3:39 PM writes...

BuyandBye

A nanny state conservative uses the government to redistribute other people's income upward (e.g. patent monopolies for the drug industry). They pretend that they are for free markets and less government than nanny state liberals (that like to redistribute other people's money downwards through taxes). For the free e-book, see Dean Baker's "The Conservative Nanny State" at deanbaker.net or type in "The Conservative Nanny State" into Youtube.

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47. CMCguy on December 4, 2012 3:51 PM writes...

As mentioned before believe you need to post a Black-box warning when ever you bring up Angell as the name stirs such frustration at how anyone (including husband/co-author) can be so wrong and lacking in real knowledge but still has a constant podium to carry on her anti-Pharma vendetta. Unfortunately the sad part is this view is often accepted as fact buy public, politicians and as #11 Rafael Fonseca MD points out in the medical community. Even worse Angell is active in passing on the to future MDs I think based on Harvard COI policies.

As to the statement "everyone knows how to do a clinical trial" I find ludicrous as, speaking mostly of academic MDs (and a fair number in industry as well), while many think they know how to conduct and may even be activity involved in clinical studies the designing and executing a good clinical study for approval is probably one of the most difficult task in achieving success. This is like saying everyone who has a drivers license can win the Indy 500.

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48. Jane Doe on December 4, 2012 4:35 PM writes...

"aside from your policy suggestions, that you're writing in the manner of someone who bought some sort of "How To Speak Conservative" phrase book, and is trying out their fluency in this strange new language. You might want to note that politically, this isn't a particuarly right-wing crowd..."

Full disclosure, I was linked to your post through Russ Roberts' twitter feed. I had already listened to Angell's interview and after reading your post and the links you provided it was quite clear I stumbled upon some confusion.

Thus I began my friendly econ 101 trolling. I say friendly because my arguments are correct. You may not be an economic conservative, but given the links to Marginal Revolution and Russ Roberts I thought it might the right angle to take.

I must say I enjoyed your posts and I learned more about the issues from a different perspective. I have no interest in demonizing the drug industry or those that are involved, the issues are complicated. However, the current patent system leads to exactly what econ 101 would predict: redistribution upwards, market distortions, and inefficiencies (not to mention scandals and political corruption which lead to the demonization of the industry).

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49. LeeH on December 4, 2012 9:24 PM writes...

Jane

I'm so glad that you cleared up the bit about the arguments that disagree with yours not being correct. If you would have said so earlier we could have avoided all this pointless bickering. I feel so much better now that I'm not confused.

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50. Jane Doe on December 5, 2012 4:45 PM writes...

Lee

I can't force you to learn basic economics, but when it comes to the drug industry, government granted patents create massive market distortions. You may like the market distortions (especially if you benefit from them), but it's not an arguable point. Many people enjoy it when the government gives them other people's income as well.

I think Lowe does a great job explaining why the trees look the way they do, but at some point, you need to take a step back and look at the overall forest. It needs to be burned down (I'm not singling out the drug industry, because of our political system many industries use the government to rent seek, most prominently Wall Street).

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51. Matt on December 5, 2012 8:21 PM writes...

@Jane,
It's clear you are a partisan troll, out to convert others to your True Belief. Unfortunately, you are attempting to lecture people who know better than you how their industry operates. You think you know econ 101, but really you are parroting some uninformed arguments from others, and making it worse by using trite, insulting, oversimplified rhetoric. Good for trolling, but also good for making yourself look like an idiot.

This blog has actually covered some of the problems you blithely assume you (or your guru Dean Baker) have solved in your sleep, but with more depth and insight. I'd recommend reading the "Me Too" Drugs category of this blog, to educate yourself (as Hyperion tried to do), but I don't have much hope that this will interest you as much as the importance of your own ideas.

I'd also recommend you never use the phrase "nanny state conservative" in a forum not devoted to licking Dean Baker's boots, because it IS an oxymoron (deliberately chosen, apparently). Using words which were deliberately designed to not make sense, in a setting where people don't know you, makes you look like a complete idiot spouting nonsense.

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52. Jane Doe on December 6, 2012 12:46 AM writes...

Matt

My True Belief is so trivial I was a bit surprised that people are even arguing it. As long as the system has the current design it will inevitably lead to bad results (and this blog has only confirmed that obvious fact).

"Nanny state conservative" is only an oxymoron if you don't consider the vast majority of Republican politicians to be conservatives. The modern Republican party is obsessively devoted to redistribution upwards, that's not very conservative. The only actual conservatives that may exist call themselves libertarians (and even they often don't merit the term because many of them don't oppose certain forms of concentrated power).

I could care less if the form of my argument is unsophisticated or makes me look like a troll (that was my intention). Once again, I've encountered fallacious or non-existent arguments, or in your case, the classic ad hominem and the appeal to authority.

And as I said before, this blog is quite good and I've already spent some quality time reading it. That said, one of the themes I kept running into is Lowe regretting the fact that the industry engages in various practices like (in the blog post "Even Worse Than Reality") "such as too-aggressive promotion, minimization of side effects, too many payments to 'key opinion leaders', too many studies that don't see the light of day, and so on. And these things really do lower the respect that people have for the drug industry..."

or

From his post "The Ethics of Avastin": "And this gets to the moral dilemma at the heart of the modern drug industry: are we trying to find drugs that work? Or are we trying to sell drugs, whether they work or not? Roche/Genentech has every right to make its case and to petition the FDA for whatever decision they want. But they (and every other drug company out there) owe the rest of us, and the rest of the world, something while they're doing it: to present all the solid data they have, and to let the numbers speak for themselves. But if the numbers can't persuade, then a company should go back and get some more before trying again."

And I could go on and on posting thoughtful commentary from this blog or simply various scandals from memory. The only real criticism I would make of this blog is when Lowe says things like "are we trying to find drugs that work? Or are we trying to sell drugs, whether they work or not?" The blog while very useful and insightful, at times comes off as an attempt to reduce cognitive dissonance.

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53. Perdurabo on December 6, 2012 2:51 PM writes...

Derek, I really liked your illustration of the process. One important point, however: at what stage does the patent issue come into play? I believe a patent must be applied before Phase I, is that correct? (Thus divulging the structure of the drug candidate to the public, including all current and potential competitors.) Does the application just have to be filed, or does it have to be actually granted before the trials begin? Is the patent term for drugs still 17 years? (I had heard there was some talk of extending it, since so much of the patent term is used up during the trial phases.) The patent issue is very important, because the drug company has exclusive rights to their discovery only for so long as the patent is in effect, and every year that the candidate spends in trials is one less year that it is not in market making money for the company so they can recoup their R&D costs. The patent clock is ticking the whole time: once it runs out, the generic companies can make the drug, incurring largely only manufacturing and marketing costs. In other words, they can enjoy the benefits of selling a drug without having to have had to do all the work to discover and develop the drug.

I've only been a cog on a wheel in this machine, having only worked in the process up the the Lead Series stage. The costs and labor up to that point are astronomical, and that's the comparatively easy part. It's almost inconceivable in terms of labor and money as to what it takes to get it further, all the way to market. I'm always amused by those who only see the sociopolitical side to this process - the fascist conservatives, the whiney liberals, and those evil, evil companies making all that MONEY! (the nerve!) Yes, they make a lot of money, an unimaginable amount. But they also spend on the same scale, employing a tremendous number of scientists, lawyers, people in advertising and marketing, etc etc., and sometimes they spend more than they bring in. Didn't you recently have a story on how AstraZeneca's last five new drugs cost a total of sixty billion dollars? We need new drugs, but they take a lot of work, and they don't come cheap. And it's not likely to get any easier or less costly anytime in the foreseeable future.

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54. bad wolf on December 6, 2012 3:02 PM writes...

What kind of troll admits they're trolling and still refuses to go away? Not the smartest kind, evidently.

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55. Jane Doe on December 6, 2012 5:16 PM writes...

I know it hurts to be reminded that the pharmaceutical industry is essentially a large government welfare program that radically violates free market principals. Just like with welfare mothers, sometimes society supports redistribution to help those that can't cope with the free market. Maybe the drugs they develop are worth the corruption and the massive redistribution of wealth to executives, scientists, marketing departments, etc., but it's an extremely difficult case to make, and nobody here can engage the troll without making fallacious arguments. And now someone is attempting to troll the troll, apparently due to their superior intelligence.

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56. Perdurabo on December 6, 2012 6:03 PM writes...

What's a troll? (relatively new to blogging).

The pharma industry needs to change in some fashion - the current course is unsustainable. But how ot change? Government takeover is not the way to go, however. For one thing, that's not the gov'ts job, and it shouldn't be. (And given how they've handled things in the past few decades, I think to give them something as complicated as this would result in no good at all.) Leave pharma in the free market, allow necessity to be the mother of the next generation of inventions, etc etc. However, realize that the costs are huge, and the science is extremely complicated and full of unknowns: that's the nature of the beast. Further developments in science will tame the beast, but that requires discovery, and that will take place at some undetermined time in the future, possibly generations away.

I'm still interested in the patent issue: about how much of the patent term is typically lost during clinical trials. I know I saw it somewhere at some point, but can no longer remember

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57. Hibob on December 6, 2012 7:20 PM writes...

I'd much rather see Derek spend time on Ben Goldacre's critique of the clinical trial process (and its occasional capture by the marketing process) than waste it on Angell.

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58. bad wolf on December 6, 2012 9:38 PM writes...

Yes, her idea that "Government is distorting the market" is very congruent with "so we should put the government in charge of it all."

Perdurabo, a troll is a "person" that anonymously posts inflammatory BS in a public forum for the joy of seeing people react to it. Since there's really nothing to engage with, any response is a waste and pays into the troll's need for validation. Sound familiar?

I just can't believe all the interesting questions people have asked on this blog and been ignored, while this cretin is worth Derek's time.

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59. Matt on December 6, 2012 11:23 PM writes...

You still don't get it, and at this point, it doesn't seem likely you will.

I think you meant "only an oxymoron if you DO consider the vast majority of Republican..." At least if you want your words to make sense, but it seems at times that's optional for you.

You have expended several paragraphs explaining this term "nanny state conservative", which is customized to your particular interpretation (or perhaps shared amongst your band of True Believers, which appear to espouse free markets and advocate government control simultaneously). If you have any power of observation, you should see the term was an utter failure at communication, unless your fanaticism has defined communication as a chance to read the gospel tract sharing your True Beliefs.

As for the ad hominem and appeal to authority, those would be fallacious as logical attempts to persuade (which I was not), or to discredit your logic (which I took to be self-evidently poor), but they are utterly correct as observations of fact. You really don't know what you are talking about, and you really are lecturing people who do.

I will acknowledge I was avoiding responding on the merits of your argument. Others had already responded, pointing out many flaws; in response you doubled down on your ideology, which indicated logical argument would not be very useful. Moreover, the great gusto with which you deploy contradictory ideas suggests that logic, such as proof by contradiction, could not be effective with you.

But I'll be more charitable and act like it will be useful, and respond to a handful of your illogical statements:

-- In your original diatribe, you casually threw out the term "copycat research" as if you knew exactly what that looked like and how it was related to patent monopolies. In fact, the real story is much more complicated, to the extent that duplicative research is unavoidable at the start and often desirable and necessary at the end. That doesn't diminish the fact that people will try to get as much money from as little work as possible.


-- You blame patents for the lack of transparent research, when in fact patents allow the possibility of transparent research (your alternative is to take research out of the marketplace and into government, which solves one problem and introduces a host of others). None of the four alternatives Dean Baker lists preclude the possibility that companies will hide valuable research; in fact, some of the proposals likely would result in the creation of shadow research and grey market pharmaceuticals.

-- You (and Dean Baker) continually make the mistake of equating patent drug prices with (market price + extra profit), when it is actually ("market" price + research and development funding + extra profit). Baker even says "The calculations of dead weight loss are also are approximately equal to the amount that
the industry currently claims that it is pending on pharmaceutical research in the United
States." Hello, he just said (R&D costs + extra profits) were roughly equivalent to industry R&D costs. If he had the sense to realize it, he just demolished his proposition that the extra profits were vastly overblown. The rest of his paper rests on this failed logic.


-- Over and over, the Baker paper compares the US pharmaceutical system unfavorably to "competitive markets." In fact, those "competitive" markets are where governments have imposed price controls, or where the government has assumed control of the research product and farmed it out to generic producers. Where in econ 101 does that constitute a competitive market? Where is the evidence that those systems can sustain innovation? Of course they are not and do not.

Why isn't Dean Baker proposing to force software companies to sell, e.g. Windows 8, for the marginal cost of stamping a DVD or supporting a download? Think of the money we'd save! And then have the government take over determining what software to write (greatest marginal social benefit, of course), so we could reduce all that frivolous gaming and unnecessary duplication, wasteful advertising. Every econ 101 student knows the ideal price for such software is the marginal cost to produce it. Idiotic analysis, by someone arrogant to think econ 101 gives them all they need to solve the world's problems.

-- You keep mentioning "free markets"; maybe YOUR econ 101 class defined free markets to include insanely high barriers to entry (decades long development, hundreds of millions to billions of dollars), and included incentives for innovation...oh wait, no, econ 101 doesn't cover that. Instead, it focuses on the supply and demand of one item, possibly with substitution, with large numbers of producers and consumers. It's a steady-state model, with perfect information flow. That's fine for aspirin, although even there safety considerations create severe barriers to entry, but in the real world we are crying out for new medicines.

You've attempted to cover this by waving a magic "government will take care of it" wand: government will choose what medicines need to be created and establish prizes or reimbursement schemes for those, government will fund the trials, government will educate the doctors and consumers, and then government will hand out the formula to companies to produce cheaply. (And yet you still claim to support free markets?! And have the temerity to say this will reduce bureaucracy?!)

Well, as has been pointed out, that will certainly reduce the unit price, but only by absorbing huge dollar amounts into government for which you have not accounted, and for which we cannot pay. And neither you, nor Dean Baker, have any idea how much money would have to be spent in prizes to incentivize innovation on the scale of what is already happening, because once those sketchy schemes get fleshed out, it is quite possible they will be LESS efficient than the current market.

The best Dean Baker can come up with is saying this:
"While there is clearly a large degree of uncertainty about the size of the incentives
necessary to support innovative research, there is no reason to assume that these four
proposals would necessarily provide any less incentive than the current system." That is, he is punting on the question of how much, just assuming that because the proposals on the table are nebulous enough, it appears to be possible to stretch them enough to match current incentives.

Recall that the average NME in 2004 took about twelve years in development time. That's twelve years before you find out whether you've sized your incentives incorrectly, and start the adjustment process.

Extraordinary claims (that is, the pharmaceutical patent system can be replaced by one of these alternatives) require extraordinary proof, not just an observation that because of their sketchy incomplete nature no one can disprove the claim.

--On the question of how exactly the government will decide which medicines need to be incentivized, he says the ones that provide the greatest marginal social benefit...and then he runs away from defining that, saying it is enormously difficult and problematic, but all the four alternatives would adjust to whatever is decided. That's not good enough. You can't tell me your replacement incentive system is even comparable to the existing one without defining it. History 101 tells me it is likely to be much, much worse.

-- You continually blame the patent system for all the incentives to do wrong. In every one of the four proposals listed, there is still incentive to fudge data, to make it look like a drug is safer than it is, or more effective than it is, or hide evidence to the contrary. You only lessen the incentive to fake innovation by lowering the incentive to innovate (or by doing what we try to already do: make the costs of getting caught higher).

Faking innovation would also involve corrupting doctors, by the way. And, to the extent that some bureaucratic government agency would determine the recipients and size of payments, why do you think government policy would be immune to sizable cash payments? Only if you think you can eliminate any profit in innovation. Back to econ 101, marginal profit of zero means you will not see any more.

Okay, that's now every phrase in your starting sentence that was overblown, inaccurate, false, or misguided.

Similarly this sentence is purely a statement of unsupported wishful thinking: "This alternative would lead to more innovation, be more efficient, lower costs for otherwise insanely expensive drugs, and advance the progress of medical research."

In fact, several of those are tradeoffs against each other, and only one--lowering costs--is clearly achievable, possibly at the cost of crippling pharmaceutical research in the US for a generation.

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